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tv   The Call  CNBC  March 12, 2010 11:00am-12:00pm EST

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chin down 8.5% this morning. >> okay, so -- wow, we have 40 whole seconds left. >> wow! is there anything from the special hour of power tonight that we need to know about. >> on cnbc. >> guy adami will be there. >> the dash for trash that took hold of citi. citi gained $20 billion in a single week and it's trading down today. the options are very heavy in city and aig. so those are things they'll be talking about tonight. >> on street signs we will talk about whether you have an obligation to minimize your tax bill and that means doing whatever it takes to minimize your tax bill. >> obligation to yourself. is that patriotic or not? >> have a good day. >> hey, good morning, everyone and welcome to "the call." i am trish regan and we are 90 minutes into trading and stocks are failing to take off here and we're not seeing too much of a rally despite the unexpected rise in retail sales and beale
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talk about the consumer and find out just where the consumer is and whether or not the consumer is ready to spend and who the winners and losers are for retail stocks right now. good morning and happy friday, larry. >> all right, trish. i'm larry kudlow. president obama wants janet yell en and whether she's the right person for the job and can she change fed policy in my life time. >> hello, melissa. >> i'm melissa francis and it is a lucrative trade involving two commodities that you can't live without, but it's called the widowmaker because if it goes wrong you can get wiped out. we'll tell you about this volatile trade. this is "the call" on cnbc. stocks opened higher as retail sales rose unexpectedly, about 0.3% in february and it stalled after consumer sentiment dipped in march. this coming a day after the s&p closed at a 17-month high.
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the s&p 500 is slightly negative on the day down almost 0.2%, almost two points, 1148 the last trade day and the dow right now is essentially flat in the session. it is in the red, but -- see in you made me a liar. a little more than one point. the nasdaq is down by five points a quarter of a percentage point. trish, what's happening on the floor? >> hey, melissa. big day friday and we've got the retail sales number out and retail sales showing the unexpected increase and that's some good news and yet you have to reconcile this with the consumer sentiment numbers and what i guess it's showing you here is that people may think one thing and they do another and what matters really, at the end of day is what they do. so good news there on the retail front. i want to bring in my pal, bob, who is following all of this and it is interesting because people may feel pretty down. they may be concerned about the unemployment situation and yet they go out and shop. >> i think the big question is why isn't the market up on such good news today? because we've had the great
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run-up. the s&p is up 4% this month and we're at a new high so don't be surprised. a lot of people have been long the market betting on better news here. i think the retail sales numbers were terrific. one thing that's interesting is we're getting winners and losers in retail. arrow postal's numbers were great and anntaylor had -- it's had a huge run in the last year upon. pacific sunwear, they had very disappointing sales numbers. this is a clear situation where some companies may emerge as big winners and big losers. pacific sunwear, clearly a laggard here. >> it's an interesting insight into the consumer right now. just look at the weather, for example in the northeast and there were blizzards and yet people still went out there and did some shopping. even though they're very concerned about the economy you can see there might be pent up demand and that might be helping things along. do you want to talk fertilizer? there's pent-up demand for fertilizer? >> they're cutting costs and we need to see top line growth and
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blah, blah, blah, potash gave guidance six weeks ago and they revised guidance last night and it's almost double the guidance they gave six weeks ago. what the heck happened in six weeks? turns out demand was much stronger for the spring planting than they thought. north america sales have been great and think about what happened, prices for a lot of the crops or the core and the wheat dropped dramatically in the last year and a half so farmers cut back on fertilizer use. now they're seeing some demand higher in hopeses, they think crop prices may be going up. >> a bullish sign there. finally, we want to talk about these inflows or lack of inflows, should i say into u.s. equity funds. what's going on? do people not buy this. >> just talk about charles beaterman. we haven't seen flows into equity funds in ages and ages and he's estimate $7.3 billion into funds and mutual fund, that's true, that's the big of the number we've seen in a long, long time. maybe the retail investor is
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finally starting to wake up as we hit new highs in the stock market. >> up 66% in the s&p in the last year. a lot of those folks sitting on the sidelines are saying u uh-oh, what did i miss and they missed a lot. so maybe they're getting back in. thank you so much. larry, back over to you. >> as the economy rebound, retailers are coming up with new and creative ways to get the american consumer spending again. cnbc's jane wells in glendale, california, with that part of the retail story. good morning, jane. hey, larry, i'm here at the glendale galleria that will be full of shoppers when it opens in a couple of hours. retailers are trying to develop brand loyalty. everyone from saks, to macy's to kohl's, penneys to target to walmart is luring you in. kohl's has had great success for its exclusive like are line from vera wang. if they fail, the retailers are
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usually on the hook for more of the loss. j. crew has been called a trailblazer and they have military watches from time exand luggage. retailers want to make sure with these exclusives that the price is low, even if it's an exclusive line of jimmy choos for h&m. >> you might thank in 2010 there might be a rebound in consumer spending as we've seen so far in february sales so perhaps retailers might try to focus margins, but many of them are still talking about passing on some of their savings on the product side to the consumer. >> nordstrom's exclusive private line of merchandise may be a quarter of the business and the retailer is also using social media. >> for example, i'm very close to one of the nordstrom stores. i happen to be following the manager of that store on twitter. i know when any big event is happening, when they're having a designer in.
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they had a special a week and a half ago where if you bought two lip sticks of one brand, you bought a third free. these are things that i wouldn't have known about that would draw me into the store. >> retailers still may be focused on low prices. the new american consumer may be feeling a bit more generous. my buy's e-commerce index in february said there was 16% growth at list price on the internet compared to a year ago. there was 28% growth in items sold at a discount, but larry, that is down from 100% growth from a year ago. back to you. >> thanks, jane. are retailers' strategies working? are consumers ready to spend? joining me is kimberly greenberger, and retail and style file group and hitha, did i get it right this morning? >> almost, larry. almost. >> i've tried so hard for months and months and months. let's go to the numbers because we had a very strong report today, particularly the core
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retail sales, right? up almost 1%, that's what feeds into gross domestic product when we get that report, and i just want to get you, merchandise stores up 1%. department stores up 1.1%. these are big numbers, are they not? >> they absolutely are. we are seeing really broad based strength right now, in terms of traffic, we're not yet seeing traffic come back to them all, but what we are seeing is more of the people who were just looking last year or actually buying this year and the ones who are buying are buying more with each transaction. this is the first sign of really broadening consumer spending strength that we've seen much better than the holiday tone which was driven by clearance activity. so this is very encouraging, larry. >> hitha, how is that possible when so many people are unemployed right now and home val have fallen so much? is it true that people are out there shopping? >> i have two words for you, melissa, it's called frugal fatigue. people want to get out there because they haven't spent much in the last two years and
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they've been cutting back, trying to save and while i do think the consumer is starting to spend a little bit, i don't think they'll see the spending like it did, the 2007, not yet, anyway. >> kimberly, do they have credit to buy things on? kimberly, can you hear me? >> i'm sorry. >> we're at the end of a credit crunch. there are people who are unemployed and home values are down. i don't think people have a lot of cash right now. i would imagine they're using credit. is there a lot of credit available for them? >> we did see credit tick up in january and we're starting to see consumer credit rebound after months and months and months of declines. i would say small discretionary services and the credit for that is absolutely available. big-ticket items and home purchases are still in question, but credit for shopping at the mall is there. >> hitha, let me raise this point. the otherwise insightful and brilliant melissa francis neglected to mention, the
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front-page story of "the wall street journal." >> am i missing something? >> i think we have to go to steve liesman because he has breaking news. let's go over to the breaking news desk. it's not just because you said i was wrong. we really want to hear what steve liesman has to say. >> thanks, guys. some details are emerging about what's going to be in that dodd banking regulatory reform bill that's coming out on monday. i've spoken to a senior administration official and i just got off the phone with senator corker who has spoken with senator dodd. here's we know. the dodd bill will supervise banks with $100 billion plus with assets. that's what's in this now. we're not sure what will e merge on monday, because an official says the administration is traying to lower the legality. the official also telling us that what we reported yesterday, the dodd/corker compromise of consumer protection will mostly stand. let me go through the details on that. the agency will be inside the fed. it will have its own rule-making authority as democrats want it,
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but the supervisors will have enforcement and that's the way corker and the republicans want it and the veto power. senator corker telling me under resolution authority the fdic will be able to loan up to 90% in the bank's assets in the relosing process. how do taxpayers get that money bank? the repayment comes first from the bank's assets and then the industry. absolutely taxpayers will be protected under resolution authority. corker telling me it will have the quote, unquote, hotel california provision. once you're under supervision you cannot leave it and that's according to corker. as for derivatives, they'll be trading on exchanges for the end user. the senators are still working on the derivatives compromise, trish, larry and melissa, that's what we know that will be in the bill, we understand there will be a lot from what corker and dodd compromised on in an effort to try to attract republicans to this bill when it's announced and unveiled on monday. >> steve liesman, let me ask you something that caught my eye this morning on the reports from
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chris dodd. dodd wants too big to fail failures, number one. number two, he wants a real bankruptcy process. >> yes. yes. >> and government resolution so that we own fannie and freddie for the rest of our time. >> let me break some more news, larry. >> there's a modest $50 billion bank assessment which in effect would be debtor and possession financing for bankruptcy. this strikes me, if he doesn't move left, this strikes me as a very good solution and the kind of free market solution that many of us have been waiting for. >> i can tell you something that corker told me i did not report. he wants to change it from resolution authority, the title of the bill to orderly liquidation. he wants it clear what that's going to be about and that is indeed about liquidating a firm, not saving it. >> is there support for this, steve, do you think? >> that i can't say. >> what would you guess knowing everyone? >> i know that dodd's getting pressure from the left, and i know corker doesn't have a lot of friends to his right. so this may be the -- the dodd thing may be the right thing to
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do, but in the poisoned atmosphere that's washington, not clear to me how many friends either of them has. >> that's too bad because that sounds like a good idea. >> a lot of news there. >> it really has -- it really has -- >> some potential. >> yes. >> it really does, and i really like this emphasis on a bankruptcy process. >> orderly liquidation. >> that is so darn important and that changes prot file. >> the argument against failure is that the whole system won't collapse because we don't have a way to get it done. no, say that's where you will go if you screw up. >> you need consequences for your actions. >> and bailout nation. bailout nation may come to an end and that is so darn important. >> indeed, it is. and on that note, when we come back, president obama wants janet yellen to be the next fed vice chair, but is she the right choice here? very dovish. plus, a lucrative trade involving two commodities called the widowmaker and traders will
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loo make a ton of money or lose everything and we'll tell you how you are affected. >> failure is so important in life.
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president obama offering san francisco federal reserve janet yellen the vice chairmanship of the fed. she would replace cohen who will be retiring in june.
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yellen is considered one of the most dovish members was federal reserve which means she actually leans toward economic growth and employment rather than keeping inflation at bay. is she the right choice? we have with us to discuss vincent reinhardt, former director of the fed's division of monetary affairs. also mr. rick santelli, one of our very own. vince, before we talk about miss yellen, i just want to get your impressions of what you just heard from our steve liesman talking about what we can anticipate on monday with the dodd financial reform bill. are we moving in the right direction? >> yes. i think there's a lot to like in what steve reported on. two things in particular, orderly liquidation, that's much better than bailouts and the second, there will be regulatory consolidation. whether the cutoff is $100 billion or lower it does mean that there will only be one regulatory agency going into a financial institution. either the fed or the fdic, but lastly, i'm not real optimistic.
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i think that they're going to have a lot of trouble with the house. the idea of putting consumer protection into the fed. the design basically is senator corker hopes it won't do that much. i don't think that's going to sit well with the house financial services committee. >> okay. we'll see on that one. back to miss yellen here. you'll say that she is the right choice. what makes you so convinced of that because a lot of folks feel she is not strong enough when it comes to the inflation fund, that she's too much about promoting employment and promoting growth as opposed to really watching inflation which many believe is the key core value of what the federal reserve should be doing. >> right. i think she's the right choice for this white house. elections matter. anybody this white house names is going to be more dovish than previous appointments. that's a reality. among a set of doves, janet yellen is a smart dove. it will be very tough in the
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confirmation process to hear her talk explicitly embracing higher inflation. she understands the importance of a conservative central banker, but she just puts more weight on unemployment and thinks the economy is such that there's more room to exploit tradeoffs. i think that's a mistake, but among the set of possible choices, janet yellen is a good one. >> rick santelli t pains me to hear vince reinhardt with these rationalizations. janet yellen is a very distinguished columnist, but rick, isn't her model wrong? she's not going to look at market prices for gold or commodities or bond rates. she's going to focus on the unemployment rate with the classic phillips curve tradeoff between unemployment inflation? she will be dovish, too dovish for too long, rick? aren't those the real possibilities? >> let's not talk about possibilities and let's see what she has to say in her own words. at the beginning of july when asked whether fed interest rates would remain near zero for the
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next foreseeable long-term, here's her answer, not outside the realm of possibility. could that be years in she repeated not outside her own possibility. at the end of industrial july when somebody was asking her about supply, her comment was i believe our debt will remain strong in terms of demand because of the major global savings throughout the world and no serious competition on issuance from the private sector. now recently, two weeks ago, she said something that many agreed with. when questioned about easing more or the good gdp number her comment was q4 gdp overstates the economy. see that? vince reinhardt, you've heard rick santelli's brilliant bill of attainer. you've heard my own analysis that she doesn't look at market prices which are much better indicators of future inflation than the unemployment rate, do you wish to change your testimony? >> i would say only janet yellen -- >> choose your words carefully
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here, vince. >> it is a ratification of the conventional economic wisdom. it is an embrace of clinton/bush economic policy making. >> but that doesn't make it right. do we need a phillips curve or haven't we learned in the past. >> we've learned in the past. >> too much money chasing too few goods. whatever unemployment is doing, high, low, whatever. >> rick, look at what happened in this past federal reserve administration with mr. greenspan. critics have come out and said the reality is having interest rates that low for that long led to more problems down the road. do we run the risk that we could see a repeat that we potentially would have another bubble because interest rates are too low for too long? >> you know, i just think at this point, actually, it almost doesn't matter who you pick because the fed puts so much on the line with treasury whether you agree they should have or not that there is no way anybody could look in that environment, live in their shoes and think they're ever going to pull out too soon.
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it's going to be too late. they have to cover their butt on this. they have too much money invested. >> that would lead to more problems, though. >> i totally agree, but that is what it is. >> if you want to create more jobs than growth which we all want to create, you have to let more people have money in their pockets and more economic incentives through lower tax rates pushing money into the system, does not create sustainable jobs or growth. do you believe that? i just want to get vince reinhardt on this point. >> yes. i do fully endorse what you said. all i'm answering is given what was possibly on the table, janet yellen was a pretty darn good pick. would i like the fed to be different? would i like the federal reservable of 2010? sure. >> we'll have more doves. all of the new appointees will be doves, right? >> elections matter. >> elections matter, but they shouldn't when it comes to the fed, vince. that's the reality of it, they really shouldn't. >> protect our dollar?
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does anyone care about protecting our currency? the market does put a constraint on fed choice. that's why ben bernanke was re-appointed chairman. they didn't want to risk upsetting markets. >> more than -- isn't he a dove? isn't he the biggest dove of all? >> he's lesser of a dove than who the white house would have picked as chairman. you've got to agree with that, larry. >> i'm going to turn it over to trish or somebody. >> i think we're getting the wrap cues here from the producer. so gentlemen, we appreciate it as always. have a great weekend. >> i'm glad we exhausted all those possibilities. rick santelli, you should have been a prosecutor, that's all i'll say. >> there's been a big turnover in the executive suite as a new batch of ceos is taking over. we will tell you why that may be a good sign the economy is actually improving. but first, it's a lucrative trade involving two commodities you can't do without. it can make you really rich or it can wipe you out and that's why it's nicknamed the widowmaker trade. you're watching cnbc, first in
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business worldwide.
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145 years of financial stability and still no one knows the sun life financial name. that changes today. i hear you're the clown in charge. so, cirque du soleil becomes... ...cirque du sun life. because soleil means sun.... (gibberish) i'll take that as a yes... sooner or later, you'll know our name. sun life financial.
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take a look at crude oil breaking through levels, 82.17 the last trade and you can see
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before the open it was even higher there because of a report from the international energy agency saying china will consume each more fuel over the next year than we thought. it's called a widowmaker, the trade that can make you rich or take the life right out of your portfolio. this time of year especially energy traders like to bet on the spread between heating oil and gasoline. and while they stand to reap big rewards, you could end up being the one that pays at the pump or at home. joining us now with the heat on this trade is addison armstrong from tradition energy and john kilduff from round earth capital. both are cnbc contributors and thank you very much for joining us. addison, how is this trade working out so far this year and which side would you be on? >> so far so good. the investor community got involved in it very early this year, and looking for another way to make some money in a crude market that's been rather flat and boring so they piled in to this trade. the spreads out to about 16 cent which is is not nearly as wide as it got two years ago when it got out to 50 cents. that indicates there's more room
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to run on this bonn. >> john, that's gasoline outpacing heating oil, right? >> exactly right. >> it gives some investors a false sense of security in that you're buying gasoline and selling heating oil. so in a way you can make money if the market goes up or if the market goes down. your belief that gasoline will go up more than heating oil will in an up market and gasoline will go down less than heating oil will in a down market. >> heating oil is not as straightforward as it sounds because it's also a hedge on diesel. you're also betting that trucks around the world will use less diesel as well, right? >> exactly. heating oil went global several years ago as a proxy for the global distillate markets, but as good as this trade can be i've seen it go the other way as far back as 1994 i remember folks getting carried out in stretchers trying to play that trade, but totally, melissa. the play is that it's too obvious at times because obviously we're going into driving season and gasoline should go up, but that's where
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the easy money stops. addison, all of the way around, traders have been bidding up the price of gasoline on the new york mercantile exchange and that spills over to the consumer market, right? >> yes and no. we're talking about this as if it's some dramatic new development. this is something that happens yearly. people buy gasoline in the spring and they sell heating oil as assuredly as they'll buy heating oil at the end of summer and sell gasoline against it. this trade, as john said, can go badly, but getting back to your point about the retail and the price at the pump, you know, if it continues to run like this, yes, it will have an impact, but so far, gasoline prices at the pump have only moved up about a dime or 15 cents on the national average so far this year. so we really haven't seen it make a material impact yet. >> let's take the flip side of that, john. you can get killed on this trade if drivers don't go out there and drive and that is something this we've seen happen recently
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as we've seen people cut back because of the bad economy and we've seen a huge supply of gasoline in the market. what are the odds that you get killed in a trade like this this year and that consumers would make out like bandits? >> we're starting to see price points at the pump in communities hitting the $3 mark and we'll have to see if the consumers can hang out at this level. they're more damaged than they were in '07 before we saw any real resistance. it's what makes it a great trade because there's momentum in it right now and it could really run as addison said, but there are things weighing on it to your point about whether or not the consumer can withstand $3 a gallon. >> how would you each bet if you were in the trade today, how would you bet on this today? are you betting that gasoline is going higher and this spread will go higher or do you not believe in it? >> i'm leary on it. i'm scarred from the 1994
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episode. >> that was a long time ago. you must have really had your hat handed to you. >> post traumatic stress syndrome at work. i would not like it, i would fade it if it got extended. >> addison, how about you? >> i think it's got two things working for it. it has low level of refinery utilization and the high price of crude. regardless of the spread itself you've got underlying reasons why gasoline, the rbob contract is moving higher. so i think given that, i think that this spread has probably got some more in it. not sure it will get out to 50 cents like it did two years ago, but if it moves from 26 cents to 15, you have a nice profit. >> i want to ask you where do you think the price of oil is. i think i saw it dip below 82 even on the news out of china today which seems so bullish. john, what do you think? >> i still think we see $100 a barrel here before the middle of the year. >> really? before june? >> july. >> before july.
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okay. $100 before july and we'll have to have you back to see if that came true. >> addison, what do you think? where do you see the price of crude going? >> i've been bearish on this market and i have to give credit where ed krity is due and the bulls have been resilient and if they can hold it above $80 i certainly feel that we'll test 85 and test 90 on the back of that and i'll tell you if you can't hold 80 this time we're going back to 70. >> we appreciate your help on this. thanks for joining us. larry, over to you. >> well done, melissa. well done. a lot of information. up next, can you call it a comeback? some say the american consumer is recovering while others disagree. we will break down retail winners and losers and how you can cash in. >> yeah. you know, one sector or retailer that's going really strong here is gadgets. jim goldman will have the details on which tech toys americans are buying. you are watching cnbc. we are first in business worldwide.
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as we told you earlier, retail sales are rising unexpectedly in february, up 3%, beating consensus expectations across the board. so who are the winners and who are the losers and where should you be putting your money. joining me is richard hastings, global hunter securities retail consumer strategist and christine chen, senior research analyst. christine, start with you. the number -- the retail sales number was strong across the board and the rlx retail index has been so darn strong for well over a year, is this an
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across-the-board play? in other words, winners and losers, i don't know, it just looks like everything's rising. >> well, that is for the most part true. they've definitely been more winners than losers in the retail space, however, we continue to think that the consumer's a little stretched, but the consumer is coming back and spending a little bit for special product out there. >> richard -- there's been a lot of pent-up demand. richard, go to you on this. front-page story in "the wall street journal." how much less consumers are borrowing and at the same time, because of the stock market, capital gains are rising and the hours worked picture for income works a little better, so i ask you, are you unambiguously strong in tre tailers on or do you want to pick winners and losers. it's overweight on consumer discretionary. the quality is better than in other sectors. you to disaggregate the consumer. so if you look at it in one big chunk you have to get an illusion and we look at it and
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we disaggregate it and we look at the top 50% of the 80% that's been continuously working all of the way through the crisis. their spending power has been increasing and -- excuse me, that is fueling better sales growth, top line growth in the sector and it's going to continue. we are now forecasting the rlx to hit 450 probably within the next few weeks. >> trish? >> i guess my microphone wasn't on so i'll say that again. christine, it's interesting to me that the consumer sentiment numbers that came in so poor and yet we're seeing that people really -- they may be feeling bad, but they're not putting their money so to speak where their mouth is. they're still going throughout and shopping. so what is that sort of discrepancy there between how people feel and how they react? i mean, do you think we can't necessarily rely on a lot of the economic data coming out to predict where this consumer is going to be? >> well, there is something to be said about retail therapy. if you're not feeling that great, retail therapy is a great answer to that.
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i think key, though, is that the markets are up. so for those that have jobs and for the higher income consumer, they are feeling a the bit better about themselves. there is pent-up demand and there is a lot of fashion in the space to get consumers out into the malls if it's special product. >> how does that affect your investing strategy? you mentioned sort of the higher end consumer. are you looking at luxury retails are right now? how would they fare in this economy. i think luxury will farewell, they fell the furthest and fell last in the front half of '09. that consumer is tiptoeing back. their 401(k)s no longer 101 ks going zero, maybe they're 301 ks so they're feeling better. again, companies like coach and companies like ralph lauren saw strong holiday sales and thus far in the spring quarter, i think things have continued to do well for them. >> richard, one interesting part
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of your note is there's a technology play hidden in here that retailers are buying a lot of technology to improve their operations. can you expand on that? >> that's fascinating. >> yeah. the industry, for example, larry, take a look at home depot's fourth quarter report. they had 228 million transactions. every one of those transactions has some sort of a data event. so the industry is able to use the technology that it has in order to drive an enormous amount of analysis off of tons of data transactions when they're interacting with the consumer. so then it improves the earnings, the predictability of how they plan product promotion and product demand in the industry, as in free cash flow in retailing gets better, that, in turn, frees up capital to spend more on technology because retailers know that that's just going to drive the next level of earnings and sales growth, so you can take what's going on in retailing and extrapolate it to growth in technology. absolutely. >> is there anything you guys will stay away from right now?
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i'll throw that one first at christine. >> i would stay away from retailers that are selling basic product that are sort of mid-price point. i think the middle is absolutely getting squeezed. the high end's doing okay. really value-oriented retailers have done well in this environment. >> high end and low end, right? >> high end and low end. gap is unfortunately in that positi position. the old navy division has done well and gap core concept has continued to struggle because of the basic product in the mid-tier price point. >> okay. we'll leave it there. our thanks to richard and christine. thank you so much. cnbc's coverage of the new american consumer continues on "power lunch." we'll look at the fashion effect. what a strut down the catwalk materiels us about the consumer. melissa? >> when we come back, a huge wave of ceo departures taking place in corporate america. find out why that may be a good sign for the economy. >> plus even in this tough economy, americans are still needing their electronic gadgets, things like this.
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we'll look at what's selling and you're watching cnbc. first in business worldwide and we are back in two minutes.
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welcome back. lion's gate plans to reject an
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offer from activist shareholder carl icahn to buy up 13.2 million shares in the movie studio. the company says the price expects a share of $79 million is just inadequate. icahn holds a 19% stake and is looking to raise it to 30%. rate now you can see lionsgate trading up 2% right there. melissa. >> ceo departures in february were at their highest level since september 2008, but our next guest says the high executive turnover is actually a good sign for the economy. john challenger is the ceo of challenger, gray, and christmas and joins us now. make the case. why is this a good thing? >> it suggests that the economy may be poised to move into the next phase of the cycle. a lot of companies have ridden through this recession. they didn't want to change horses mid-stream with the ceos. they had to have too many kind of survival issues on their minds to go through the period with someone on a high learning curve. >> but why would you then keep
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them the most desperate times for your company? why would you keep a guide you're not interested in keeping down the road. what happens is, in tough times you want a ceo whose financially, oriented operations so he or she can come in and keep that company from failing, looking for efficiencies and keeping costs down, but as the economy starts to expand and you start to think about the future, there are other companies who say let's find a ceo with more marketing and more sales and maybe more nationally oriented that can take us into the next phase. >> i like that, john. the root canal accountants, this time and her time has come and gone and now you want to have bigger growth and maybe you take some risk. how's the pay story? as these guys are moving in and out and is the pay story picking up because that's a good market indicator. you don't have those figures, but certainly, companies take a look at what that ceo is making in his or her last job. you look at what the industry's making. we've got a lot of pressure on ceo pay and we haven't seen any
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big changes there. so companies when they're hiring someone new, they're bringing in a star to make change. they pay for that individual's services. >> just back to your traditional stuff, john. your layoff survey shows, way, way, way down. we're back, what? several years ago. so are you willing to say the crisis has passed? >> i am willing to say that, it doesn't mean we can't go back into a double dip recession. we've seen five consecutive months of very low downsizing numbers and a time, in fact, when often downsizing isn't at its heaviest. so it does suggest to me that the economy is poised to move into this next period of time. in fact, both these surveys kind of point to the same tipping point place we may be at now. >> they're poised but do you actually see anyone hiring yet? >> we haven't seen major job creation, but you can only go for so long where you've cut your staffs to very thin levels where you are not downsizing anybody, but we are seeing
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temporary hiring continue to grow so there does suggest there's demand there and that issue of moving temps to perm is still in this middle of the jobless recovery period, still an issue as cautious ceos say i'm only going to really start turning on the job creation engine, and the manpower engine when i know that my business seems to be for real, not just for the short term and the demand's really there. >> i imagine with the ceo picture that the pool of talent has got to be pretty good at this point. >> no question about that. there are more good, solid -- not just executives, but people out there that i've ever seen. people waiting for those jobs and people who would normally be hired and who have come through this long recession and the long-term job search number at record, huftorric highs and four out of ten people out of work right now have been out of work for six months. there are a lot of people waiting at the gate. >> what's one or two hottest sectors for this ceo change. the heaviest sectors are cutting
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jobs, interestingly. health care, government non-profit and energy. energy is an interesting one, we saw a lot of wind and solar power ceos get pushed out as hopes for that sector begin to fade. you mentioned health care which is an eye-opener because of the government regulations coming down. are there health care guys, are there more job losses than job gains? is pay going up or down? is it a healthy sector from your standpoint? >> i do think it's a healthy sector and i think a lot of health care companies are looking at this legislation and they're beginning to say it looks like it's going to certainly impact our business. we've got to make changes now. so i think it's being affected by the health care legislation. it's been health care, the strongest area of job growth right on through this recession. >> that is true. private health care's created about 700,000 new jobs even while the overall payrolls have dropped 8.5 million. >> you just know that stat off the top of your head?
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that's impressive. >> private health care has been such a great source of growth, innovation and job creation, john. you just hate to see government strangle it. that's my point. >> yeah. no question. it is the healthiest, strongest sector of the economy. >> yes. yes. >> and certainly long-term prospects with the aging baby boomers. >> it should be great if they'd just leave it alone. excuse me. >> john, thank you so much for joining us and bringing all that information with you. trish over to you. >> larry's like a walking, talking encyclopedia. >> i just followed this darn industry. it's one of america's greatest industries and sometimes certain politicians in washington make it sound like it's a horror to america. >> 700,000 jobs is a lot especially at a time like this. >> all right. "power lunch" coming up at the top of the hour. michelle caruso-cabrera, what have you got? >> the autopsy on lehman brothers. we look at their collapse and ask is wall street still addicted to the repo man? we'll explain when that means.
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also many analysts say americans should brace for $3 a gallon gasoline. would that be the breaking point for the consumer and the economy? we'll explore the fear factor at the pump and what's it like to buy a toxic asset? we'll follow it. we'll talk to somebody who has done exactly that, bought $1,000 worth of a toxic asset and we'll follow it through the lifecycle and see where the mortgages are and if they get paid back. back to you, guys. >> when we come back, even in tough economic times americans can't get enough of electronic gadgets. >> are you in that camp, too, larry? >> this may not be my strongest segment and we will look at what's selling? we will look at why. you're watching cnbc, first in business worldwide. >> i'm going to get you an ipod. 
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welcome back to "the call." with your daily realty check i'm diana olick in washington. bank of america reports it has now completed government assisted modifications on 21,000 loans, that's up from 12,000 last month. it still has 240,000 in the trial phase. the treasury is set to release its monthly status report on the home affordable modification program later this afternoon. lenders and servicers are increasingly going after borrowers after foreclosure. that according to moody's. rising losses for the banks on seized properties and higher income borrowers walking away are driving the trend. servicers are able to place liens on these borrowers' assets. dave stephens warns that a proposal to increase the minimum
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down payment to fh alone from 3.5% to 5% would threaten the market. his agency would ensure 300,000 fewer loans a year. that would be a 40% drop. check back with the realty check at 2:50. until then go to the blog at cnbc.real cnbc.realtycheck.com. trish? >> one thing still holds true, guess what? americans love their gadgets. apple's through the roof, digital cameras, smartphones, flat panel tvs continue to sell like hot cakes. jim goldman is breaking down what sells and why, jim. >> hey, jim. >> hey, trish. good morning to you. happy friday. such a fitting report to do on the day apple takes pre-orders on the upcoming ipad which officially goes on sale two weeks from tomorrow. analysts are expecting shortages on the new device and this is only the wi-fi version we're talking about. the 3g one that will cost over $800 bucks that will come later. apple's retail strategy has been
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a barn burner through the recession. the company's 280 stores hosting 30 million visitors last quarter alone and apple says it can open as many as 24 new stores over the next two years and that's just in china. apple isn't the only electronics company seeing steady strength through a bitter recession. flat panel tv sales actually accelerated their momentum, up 34% in 2008, but 37% last year and lcds jumped 50% year over year last quarter. what about smartphones? in a word, huge. apple iphone saw sales double from 2004 to tonight 09. linux mobile and linux-based devices did see declines and google's android's based phones saw an increase. more handset makers began rolling out new devices and it is not all rosy for electronics and digital camera sales are marketedly lower from 2008 to this year says idc. 35 million cameras worth $6.6
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million in sales expected to sell this year and that's against the 40.4 million units sold in 2008 worth nearly $8 billion. as more and more smartphones include more and more megapixels and that can pose an ongoing issue and it is clear consumer electronics weathered this recession and well. i'll take a look at the electronic retailers and video game business. >> people are addicted to their gadgets. thanks so much. a quick break and we're back with "last call." you're watching cnbc, first in business worldwide. when you're trading a stock, every penny counts. i hate when the trade is done and you find out you paid more than the quote price. i want it at the price i expect... or better. td ameritrade's unique trading platform uses multiple market centers to help you find the best possible price. i like those odds. i know they can't flat out promise a better price, but they're always looking for it.
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welcome back, everyone. hey, larry, i just wanted to point something out to you. i don't know if you saw it in today's journal, there is a new 20 trend called onshoring, get it? rather than offshoring. some of the katrina companies are taking their production from overseas and they're looking at moving it back here to the u.s. in part because it's so

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